Hedge Fund Firm Charged with Fraud Files
Bankruptcy

Reuters reports that, in conjunction with the
bankruptcy filing, Bayou filed suit against investors
including UT Medical Group Inc. and 25 others in a move
to recover profits that Bayou paid to those defendants
before it collapsed. “It is patently unfair that certain
former investors received all of their money back, plus
profit, while other investors received nothing,” said
Jeff Marwil, a partner with the law firm Jenner &
Block, in a press release from the firm.

The lawsuit charges that UT Medical and other
investors received fictitious profits and outsized
returns for their investments in Bayou, according to
Reuters. The suit, which applies only to Bayou’s US
operations and not those in the Cayman Islands, seeks
return of the alleged gains to the estate of Bayou under
fraudulent transfer statutes.

The hedge fund company was charged with fraud that
included the overstatement of investment gains, the
understatement of losses, reporting gains to investors
when there were actually losses, and creating a bogus
accounting firm to certify its false financial statements
(See
Bayou Funds Sued For Fraud
). Company founders Daniel Marino and Samuel Israel III
pleaded guilty to conspiracy, investment advisor fraud,
mail fraud, and wire fraud (See
Bayou Founder Pleads Guilty to Fraud
).